The U.S. Will Be an Oil Giant Again. But It Won’t Be Energy Independent

The IEA predicts that the U.S. will soon become the world's biggest supplier of crude, thanks to a homegrown boom in production from shale oil. But while more domestic production will help the economy, it won't ensure that the U.S. will become energy independent.

Nabors Industries Ltd. floor hand Tyler Iszler monitors the level of salt water in a tank near a Nabors crude oil drill rig contracted by Fidelity Exploration and Production Company, a subsidiary of MDU Resources Group Inc., outside New Town, North Dakota, on Feb. 11, 2012.

U.S. Presidents since Richard Nixon have obsessed about American dependence on foreign oil—and have proven unable to do much about it. U.S. domestic oil production was on a long slope downwards, while the American thirst for crude—and the size of our automobiles—kept increasing. As a result, despite all the bipartisan hand wringing about imports, the U.S. just kept getting more and more dependent on foreign oil—and especially foreign oil from the Middle East, which happens to be home to a number of countries that aren’t exactly fond of us.

But now, quite unexpectedly, that’s changing. Thanks to a burst of new shale oil production in states like North Dakota and Texas—as well as conservation measures like increased auto fuel efficiency—U.S. oil imports have been falling, with the country now bringing in just 20% of its energy from beyond its borders. And if the International Energy Agency’s (IEA) new World Energy Outlook is to be believed, the U.S. may be on its way to becoming the single biggest player in the global oil market. By around 2020, the IEA projects, the U.S. will be the world’s largest global oil producer, overtaking both Russia and Saudi Arabia. U.S. oil imports will keep falling, and by around 2030 North America as a whole will become a net oil exporter. From being the world’s biggest customer for oil, the U.S. could become the world’s biggest salesman.

That’s good news for the American economy and especially its trade deficit, which would benefit significantly from wiping away the $460 billion the country spent on foreign oil last year. The burst in domestic oil will also help create well-paying jobs, especially in states like North Dakota, Wyoming and Texas, where the oil boom is centered. The continued growth of shale natural gas—along with existing supplies of coal and increasing renewables like wind and solar—means that the U.S. may well be able to meet nearly all of its energy needs itself. And so many domestic resources mean that electricity prices are likely to be much cheaper in the U.S. than in Europe, which will aid industry. But the one thing politicians most want is the one thing the U.S. still won’t be: energy independent.

That’s because no matter how much additional oil the U.S. is able to pump in the years to come, the global oil market is just that—global. Oil is the ultimate fungible commodity, able to be shipped and piped around the world. (In fact, this portability is part of what makes oil so valuable—electricity, however it’s produced, can’t easily be transported long distances or stored for very long.) That means the price of oil is set on the global market, and—government subsidies or taxes aside—consumers in oil-exporting nations will pay about as much for crude as consumers in oil-importing nations.

That’s why crude prices—and the price at the pump for gasoline—has remained so high for U.S. consumers over the past couple of years, despite the fact that we’re in the middle of a real domestic oil boom. External events like the 2011 crisis in Libya—which took a major oil-exporting nation offline—and the tightening sanctions squeezing Iran easily outweighed the additional million or so barrels a day that shale has been able to add to U.S. supplies. Even a U.S. that can out-drill Saudi Arabia will remain subject to the global oil market—which increasingly will include the oil appetites of consumers in fast growing countries like India and China. As long as we remain utterly dependent on oil to make our cars and planes go, we won’t be able to declare ourselves free from global oil markets.

That means that one way or another we’ll still be entangled with the economics of the Middle East oil market, since even as the U.S. imports less Persian Gulf oil, other regions, like East Asia and most of Europe, will still be hooked on the stuff. Certainly, a healthier domestic oil industry means the U.S. will be better cushioned in the event of a major supply disruption from the Middle East—the energy analyst David Goldwyn notes that reduced imports mean that the Strategic Petroleum Reserve could last weeks longer than it does now—but the price of oil would still skyrocket, hurting American consumers. And in a globalized economy, we won’t be spared if painfully high oil prices cripple the Chinese or Indian economies.

Of course, like all long-term forecasts, the World Energy Outlook should be taken with a shaker full of salt. The IEA’s models assume that shale oil will keep producing well into the future, even though shale wells tend to dry out much more rapidly than conventional wells. That means oil companies need to keep drilling more and more wells to sustain output—and no one knows how sustainable that strategy is. There are also environmental concerns about the hydrofracking done to extract shale that could lead to regulations that eventually curb production. The IEA also assumes that the U.S. will keep tightening energy efficiency standards, actions that are nearly as important as increased domestic oil production to reducing total imports. President Obama’s re-election makes that more likely, but don’t forget that one major political party—that would be the Republicans—seems to be opposed on principle to conservation standards.

The IEA report is full of other useful predictions—some of them rather frightening, like the possibility that by 2017, the world’s existing energy infrastructure will likely “lock in” the world to a 3.6º F (2º C ) temperature rise. That’s the red line that many scientists have set for global warming—anything above that and we could be setting ourselves up for a world of hurt. There’s good news too—renewable energy, including hydro, is predicted to become the world’s second-biggest form of energy generation within three years, and could be threatening coal’s supremacy by 2035. But as the out-of-nowhere burst in U.S. oil production shows, new technologies and new politics can shake up even the most trusted predictions. Given how dire the forecasts for climate change look, we’d better hope there’s something out there that we can’t predict.

Why or why do we allow the oil companies to blackmail and betray us over and over. Oil is NOT a fungible global commodity, except we stupidly treat out own oil that way. There is no law of the universe or economics that says we have to suffer to the lowest common denominator around the world in order to boost the obscene, disloyal interest of oil companies. This is a self imposed helplessness and need not be. It does show very clearly just who is at fault and who will never serve the national interest without tight regulation. These people are nothing short of unpatriotic traitors and should be treated as such.

Probably a view that the petroleum companies won't like: We should never allow one drop of North American crude or it's end products to be exported. If we eventually reach a point where the US and Canada produce enough oil to meet our needs it will be the first time since 1970 that we were not held hostage by people who hate us.

Some were not born and some may not remember the depression of 1974 caused by OPEC. I was twenty four, trying to support a family and remember it well.

If we reach the point of self sufficiency we should not surrender our security in order to make international oil companies any wealthier than they are today.

Let's "borrow" a priority from the top of Mitt Romney's campaign goals: Energy. And Ivan, we are not into making the U.S. a less global or economic power. That was the thrust of the message in the "Obama2016" documentary. Although It might seem that way. Life has the potential to "suck" more in the future, than anytime in the past.

Really do not understand why America wants to be an Economic power again. When America was the world's leading Economy only a small minority gained the benefit, life in average still sucked for example: health care, social inequities. What's the point yo? Shit even funded the Iraq War, Agent Orange... Very pessimistic there sorry but don't worry about Economics theres bigger fish to fry =)

Solar powered Engines are not inevitable in future. What we see andexperiencing today, the PHYSICS has not visioned just 100 yearsbefore.It should be taken for granted that dependency on fuel energyreduced to half at least in due course of time.

It's very interesting to see the US now faced with the situation that Canada found itself looking at a decade ago, when the oil sands suddenly became economically viable. The question arose: should this resource be left undeveloped to please onlookers in other countries? While some Canadians wanted to shut the industry down, a slim majority decided not to do so.

The silence of US environmentalists, now that the US seems about to become the world's leading oil producer, only confirms what people in other countries have long suspected. The US environmentalists are there to talk a good game, while they alternately frighten and cajole their American backers to donate funds. Of course, you never want to offend the people you want to donate to you. This means that the US donors will never be asked to make the sacrifices it demands of others. In fact, they'll never be faced with anything like the criticism directed against other countries. It explains why the oil sands have been demonized as the greatest threat to the earth's future - because they're in Canada. Meanwhile coal-fired power plants, which produce 400 times the CO2 of the oil sands, are completely ignored - because they're in the US.

Now this is some good news. It also makes way for the US to disengage from the Muslim world. This will save wasteful cost of various aid in cash and kind. It can reduce arms production, another wasteful expenditure hardly contributing to the quality of life. This will be a good move to stifle terrorism. Today almost 30% of the working population is engaged in a non wealth generating terror related activities- abetting terror, controlling it, enhanced security and surveillance. If the situation continues we may find 50 % of world population engaged in these wasteful activities. The balance 50 % will continue to be under stress, not devoting enough time towards progress of the human race. Let the US lead the way towards a peaceful world. Let it allow the Muslim world, whose core problem is the historical sectarian animosity between Shia and Sunni,( which has unfortunately spread all across continents, thanks to interventions by the West), settle it on its own. After all it is akin to a family feud and needs settlement within the house. There is every chance of widespread uprising like the Arab Spring across the Muslim world, which could facilitate quicker settlement.Read more: http://science.time.com/2012/11/13/the-u-s-will-be-an-oil-giant-again-but-it-wont-be-energy-independent/#ixzz2CD3XNM7O

The US or any other country may become independent of OIL if they use abundantly available wind & Solar Energy around the world. free of cost and maintenance. Of course the initial installation cost would be a bit high which could easily maintained by subsidizing and providing loan on easy terms to consumers through Banks.

Even if we drilled more oil than we use we still would not be energy independant. WE dont drill. We allow the Oil Corp to drill and then its their oil. Then we are dependent on the Corporation. They can sell it to us or they can sell it to whoever offers them the highest price. So how can we become truly energy independent? We cant. We would have to own the oil that comes out of our ground. And we cant do that because that's socialism.

this article and the entire concept of energy independence is myopic at best, and an outright lie at worst. because people won't look at the truth.

the truth is, america is #13 on the list of proven oil reserves. the top six countries on the proven oil reserves list have at least five and in some cases more than ten times our reserves.

if we become self sufficient for oil, we will burn through our entire reserve fairly quickly, and then be at the complete mercy of those countries with huge reserved. and i say we will be at their mercy because nobody has figured out how to run tanks and airplanes on non-petroleum fuels. armies and navies REQUIRE petroleum to run. and lots of it.

the bottom line is: the last guy with oil in the ground wins. and the U.S. is NOT going to be that guy.

the only people who are receiving benefit from reducing our imports of oil are the oil companies looking for short term gains and the politicians trying to curry the favor of the people who own those companies.

what do you think we are going to be paying for oil when OPEC or venezuela are our only sources?

Mr. Walsh's headline is based on a misconception. The term "Energy Independence" was never, before this article, used to mean that our energy prices would be set independently of global markets. Rather, the term meant only that we were not dependent on imports. If the IEA projections prove true, we would be "energy independent" by the common understanding of that term. Mr. Walshis correct that, absent government action prohibiting exports and imports, our energy prices would still be tied to global market prices determined by global supply and demand. But those are two different things and confusing them does not aid the analysis or the discussion

One only has to look at Canada to see the benefits(?) of energy self sufficiency. Canada is a net exporter of oil, yet they pay the same amount at the pump as we do. Canadian oil companies will sell in Canada or export, wherever they can get the most money. Same here. Another example is look at US food production. We are of course self sufficient, but prices are going up because farmers will export their crops if they can get more money overseas.

The answer would lie in lower dependence upon shale gas with fracking methods which would make future generations more vulnerable to earthquakes. The way forward is to embrace low energy and holistic lifestyles as outlined @ pradeepkdas

Well drilling and obtaining oil and making the US self sufficient are two separate things. As an example the Keystone XL pipeline is intended to ship Canadian oil to the overseas market through the Houston area. Just last summer therer was a glut of crude in this country and no where to store it.

We were expecting that USA to develop alternative to petroleum energy which would help the rest of the world due to ever increasing price of Petroleum. But this development may not be good for the world.

@AllanAshby Please tell the environment group promoting coal, heavy oil and any other hydrocarbon abuse of the environment. If you must make up stories, at least be prepared to be challenged on blatant lies.

@AllanAshby @AllanAshby Allan, that 400 times number is not chemically possible, primarily because oxidizing carbon (C) coal and a saturated hydrocarbon (i.e. CH4, C2H6, C3H8) methane, ethane and propane, etc., all produce CO2 as their primary end product, albeit natural gas also produces water. The only difference is, the CO2 produced by coal is roughly twice that of natural gas per unit energy. Oh, and obviously the green lobby is targeting the shutdown of all fossil fuel generated energy. Stick with facts if you want to retain any credibility for your arguments.

the pollution in oil-fired plants is ignored largely because the citizens of the United States WILL have their electricity, or there will be hell to pay. and the bill for that bit of hell will be addressed to washington d.c.

oil sands became economically viable at that exact moment when oil prices rose high enough to make them viable, and for no other reason.

@kolagunta i'm not sure what history books you've been reading, but three things are clear: they had very large pictures and very small words, they were written by non-muslim westerners, and they began "once upon a time..."

30% of the working population of the U.S. works out to something like 20 or 30 million people. and you state they are all working in anti-terror-related activities? oooooookay then!

sad to say, and rarely stated, the core muslim problem isn't that the shia's and the sunni's don't play well together. their core problem is that the west has messed with them, used them, ripped them off, and otherwise manipulated them for the profits and growth of the west. read any reputable history dealing with the middle east from about 1850 to the present day. read a few histories written by muslims of good academic standing.

@AdamRussell There are places that have tried your suggestion - take Venezuela.

The government has expropriated the oil industry - to name just one. Venezuela has some of the largest reserves known. In addition to massive conventional reserves, it possesses an oil sands deposit which hasn't even been properly surveyed. About all that is known about it is that it/'s larger than Canada's oil sands, and it should be easier to bring into production.

'Should be easier'? Well, that's the problem. The expertise to develop an oilfield isn't something that's all that commonly available. Venezuela has put out feelers to Russia and China, for some form of cooperative development. Russia and China don't seem to be too thrilled with the prospect, seeing what's happened to everyone else who ever put a dime into the ground there.

When you look around the world, you see very few places where oil and gas exploration is free and secure to international investment. Many would argue that we are not suffering from a scarcity of oil, so much as we are suffering from a scarcity of places to look for it, free from the machinations of governments and their state-owned oil monopolies.

@jdyer2 We pay way more at the pump than you do - about $4.78 per US gallon, when you convert it from liters. You can do it yourself, it's currently down to about $1.25 a liter here for regular - and the Canadian dollar is more or less at par with the US dollar. There are 3.78541 liters to a US gallon. When you were complaining about $4.00 per gallon gasoline, our prices were edging toward $7.00 per US gallon.

The difference isn't in the production costs, but in the way that gasoline is taxed - much more heavily in Canada than in the US.

It's silly to encourage people to waste an extremely valuable resource. The only countries that keep their oil and gas cheap for domestic consumption are places like Venezuela - and we all know how well their economy - not to mention their oil industry - is working, these days.

@superlogi@AllanAshby Thank you for pointing that out. I had wondered about the figure and where I'd heard -- not read -- it. I believe that the figure came from the end of a CBC-TV report of a meeting between PM Harper and President Obama earlier this year, where they pointed fingers at each other over CO2 emissions. It apparently doesn't have as much to do with the chemical processes as it does with the relative sizes of the industries.

According to Ethical Oil, an oil sands website, the total CO2 emissions for the Canadian oil sands are 45 million metric tonnes - mmt - per year, while US coal-fired plants are estimated to produce about 60 times as much [2700 mmt] CO2 per year. The story at Ethical Oil's website, mentions that China plans, within the decade, to have a coal-fired electrical capacity producing 330 times as much [15,000 mmt] as that 45 mmt figure for the oil sands. If you put the two together, they do total roughly 400 times, and that may be where the figure originated.

At any rate, I'm sure you'll agree that even just a difference of magnitude of 60 times is significant.

@rocketgrrl@AllanAshby The pollution is from COAL-fired plants, which still produce the majority of US electricity, is what is ignored by US environmentalists. Along with the heavy oil in southern California, which is excused on the grounds that it is 'strategic,' even though it has a larger carbon footprint than oil sands bitumen.

Economic viability is also affected by technological change. Oil prices first rose in 1973, while the oil sands became economically viable around 2003, according to US DOE estimates.

@rocketgrrl@kolagunta The problem with Islam started a lot earlier than that. Islam spread by rape and pillage, not by anyone's consent. The Quran commands that the infidels must be subjugated by any and all means. Its supremacist creed allows some of these conquered ones to live, but only in order to provide a living for their Muslim masters by paying for 'protection' -- sort of like the kind of protection Al Capone offered people.

The fertile North African fields were the breadbasket of the Roman Empire. They were destroyed and have never recovered. This was necessary, like the destruction of the Great Library at Alexandria, to crush the infidels by destroying the sources of their power. Calling these events and the massacres that accompanied them "the spread of Islam" is the basest of lies, one that far too many non-Muslims have believed.

The break between Shia and Sunni is a quarrel among thieves between Muhammad's would-be successors, by descent or by authority, respectively. This far from peaceful "spread of Islam" went as far as Tours and the gates of Vienna, and it was only turned back by force. Of course, when the infidels dared to try to fight back, they were - and are to this day - denounced as imperialist 'crusaders,' trespassing on "Islamic lands and rights."

After a thousand years of this barbarism, there wasn't much left to fight over - or with. It was only then that the descendants of their former victims returned, to "mess with them," as you put it. If they had paid back injury for injury, there would be no Muslims left.

Islamic apologists must love to read your whitewashing of their past. Just one look, and they can see how well they have succeeded in their taquiyya, their 'holy lies.' Yes, that's right. Muslims worship a god who commands them to lie, to promote their faith.

@AllanAshby@rocketgrrl "...the new one just hasn't been figured out yet..." is a completely and imo optimistic viewpoint not supported by any facts that i'm aware of. There are NO fuels extant that are of sufficient energy, quantity, and handle-ability to fulfill general military needs in peace or war time.

the energy industry will move towards the quickest available profits. it always has, and always will.

as for "racing to the very last barrel of oil," we're already in the race, and have no mathematical chance of placing, much less winning. any look at a credible proven reserves or estimated reserves table for world petroleum will prove that quickly enough, if one has the intelligence to look.

"After all, the Stone Age didn't end because we ran out of stones." is simply rhetorical and doesn't even qualify as witty. Wit, at least, has some modicum of logic behind it. sadly, this comment does indicate the level of thought put into the comment in the first place.

@superlogi@pkd603 Before Greenpeace, there was Horsepeace. Well, they didn't call themselves that, but it fits them well. (Actually, it fits Greenpeace even better, but I digress.)

In the 1890's, there were a number of alarmist studies about the impact of horse-drawn vehicles on metropolitan London. Given the problems of bringing in feed, removing waste, stabling the horses, and housing the drivers and the farriers - the 'horse mechanics' - the authors confidently predicted that - unless other methods of transportation were adopted - soon there would be no room left for anything else in London. The city would be strangled by its transportation system. I believe the date they gave for their dread prediction was 1920.

Then the automobile came along, to save us from all of that congestion and pollution.

@superlogi @pkd603 Maybe go back to a pre buggy era...travel as fas as one can walk...make buggies expensive and horses only for transporting goods...tax buggies....back to nature and pre electricity days... Or severely limited uses of electricity...maybe only for education and listening to a bit of music...cap of power usage per head per day or week...reduce high usage of other scarce resources like water...evolve a new grammar of living outlined at pradee

@AllanAshby@superlogi Except, that it's not 60 times per unit energy, which is arguing apples to apples. The fact is, most electrical energy in the world is coal fire based and that includes Europe, both East and West, the US and, of course, China. I should also remind you that if it weren't for coal, all forms of energy generation costs would skyrocket, ruining many economies and particularly affecting the very poor. Furthermore, the key isn't to quit utilizing fossil fuels, the key is to sequester the unwanted by products of that utilization. In short, why spend hundreds of billions on a technology which is incapable of producing the world's energy requirements, but refuse to spend money on R & D for making fossil fuels more clean and efficient?

@AllanAshby@rocketgrrl@kolagunta Oh this is rich. The all time,hands down, looting, ethnic cleansing, betrayal of treaties and promises, and the greatest genocide of all history was the invasion of the New World by the White Christian Europeans eager to spread their poisonous religion by force, in particular the conquest of what became the USA. In return they justified this "manifest destiny" with their White Christian European religion complete with the unquestioned White European looking "Son of God" despite the fact the historical record indicates a Middle Eastern Semitic dude. In just over a century they dwarfed what the Nazis could do in only a decade. They even took pride in forcing their religion of slaves in areas were there were no more native to abuse. All this too was justified by their Religion. The dominant non-Catholic sect to this day was formed explicitly to support slavery and only in the 1990s dropped the call for compensation to be paid to the descendents of slave owners. Pat Buchanan has an essay recently published calling for scurrilous "Liberals" to admit the forced arrival of slaves brought the joyful "freedom" of the Christian religion to them. To this day they try to their impose religious laws on a majority that does not want it, being against the freedom of choice in particular and gay rights.

Now do you see why the rest of us don't trust you Christian bigots? You have a really, really bad history. You won't admit and you try to continue it. No wonder you worship the gun even more than the cross. With such guilty history, It is hardly surprising that you refuse to give them up and join in a truly civil society.

yuppers! all of what you say is more or less true. like me, you didn't quite say everything though. Christianity has just about the same bloody history as Islam does. come to think of it, christians and muslims have been having at each other for a very long time. the crusaders had their excuses, the muslim expansionists had their excuses, and today's jihadis have theirs.

btw, subjugation of non-believers is not one of the five pillars of faith, if memory serves.

gotta wonder if there isn't some sort of normal or genetic behavior here.

okay, that might be possible. let's look at it. according to wikipedia, the world produces some 190 million tons of anhydrous ammonia annually, requiring a bit over 1% of the worlds electric power consumption (i believe that number to be suspect).

producing sufficient AA to power the U.S. fleet of jets, tanks, and other petrol-gulping machinery would require an obscenely large amount of electricity, as well as an awful lot of production equipment and facilities.

then there are the logistical problems. AA has to be stored in special containers (it is highly caustic), and must be stored under pressure or at low temperatures. this would require complete revamping of the logistical fuel pipeline (every tanks valve, pump, hose, fitting), as well as the development of a completely new set of jets, tanks, etc. designed to to use the stuff. it would be easier and cheaper to simply go to war with Ecuador and take the petroleum.

after working for nearly 40 years in the electronics/aerospace business as an engineer, i've seen huge changes in technology and the societal changes associated with those innovations. its been absolutely marvelous.

i've also seen the advent of wind power electrical energy and commercially viable electrical automobiles, also marvelous.

my comments and perspective may indeed be Malthusian, but i state my points based only on oil usage and exploitation as it is today, with no thought of growth in the extraction of or usage of that oil. my comments are purely based on steady state conditions. nor do i necessarily predict a dire future. things will change. i'm not privileged enough to know how or when.

i do know the united states will not put away its military equipment simply because we can't afford the gas to run them. we will either find another way to run them, or acquire another source of fuel.

if technology can find a way to power military systems without petroleum, then the whole story changes. for example, it may be that manned fighters will be replaced by smaller and much more energy-efficient drones, capable of being solar powered (someday, not today). if so, the picture changes.

and i do sincerely hope that this picture does change. americans WILL have their energy needs met, one way or the other. if technology does not show us a way to accomplish this, america will very likely, no....almost certainly find a way to meet its energy demands through political and military means which would override any other nation's sovereignty considerations.

@rocketgrrl@AllanAshby The tight oil that is now coming on stream in the US was produced with hydro-fracking technology created during the development of the oil sands in Canada. Ten years ago, some of it didn't exist. Thirty years ago, none of it did. I suppose that people could have said that these weren't "supported by any facts that they were aware of," too - but that's the whole point, when you're looking at technological change.

As far as the rest of your Malthusian perspective goes, please see my reply to superlogi, below, for some perspective on the confident predictions of human experts.